Karen just turned 50 and thought it was time to check she was on track for her retirement. She went to her accountant who suggested she set up a Self Managed Super Fund so she could invest in a property.

Without getting a second opinion and because Karen trusted her accountant, her SMSF was set up. She was introduced to an adviser and a property developer who happened to have a new block of apartments going up and there were only a couple of apartments left for sale.

To buy an apartment on the block, Karen had to borrow money through her SMSF. To help her do this, her accountant and property developer referred her to their mortgage broker. So in no time, everything was set up and Karen was happy everything was under control and she was on the right track for her retirement.

Fast forward 5 years, Karen’s bank sent her notice that the loan repayments were now going to be principal and interest, which meant she had to come up with more money to continue to service her loan. With the substantial body corporate fees, SMSF fees, her rent and employer contributions into super she was not able to cover the expenses and the additional loan repayments. The super fund quickly ran out of cash and Karen had to contribute her own money to keep the property.

What’s worse, is when Karen looked at the current value of the property, she was shocked to find out that it was $75,000 less than what she originally paid.

Karen panicked – she was going backwards.

She learnt many lessons from this, unfortunately, too late.